We have been assuming that nature dictates the probabilities of various possible events. However, sometimes an investor can pay to alter the probabilities. Gautam, who is risk neutral, is considering whether to invest in a new store, as the figure shows. After investing, he can increase the probability that demand will be high at the new store by advertising at a cost of \(50(\$ 50,000)\). If he makes the investment but does not advertise, he has a \(40 \%\) probability of making 100 and a \(60 \%\) probability of losing 100 . Should he invest in the new store?

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EV=10 Invest Do not invest High demand 100 Advertise -50 80% EV=60 Low demand -100 20% EV=10 High demand Do not advertise 100 40% EV=-20 Low demand -100 60%